Sales Slump at Take-Two

The hits just keep on coming at Take-Two Interactive ( TTWO) -- and not in a good way.

The video-game software publisher and maker of the popular Grand Theft Auto franchise reported that a year-ago profit had turned into a burgeoning loss in its first quarter, thanks in part to a 47% drop in sales. The company didn't immediately give a specific forecast for coming quarters, but said it didn't expect to return to profitability until the fourth quarter of its current fiscal year.

In a statement Tuesday, the company attributed its poor results to tough year-over-year comparisons and to a weak overall market for video games as the industry goes through a transition to a new generation of video-game console technology.

"We are working to manage through the console transition, while positioning Take-Two for future opportunities," company CEO Paul Eibeler said in the statement. "We're taking a hard look at every aspect of our business and are balancing the need to manage expenses while investing in creative resources and the infrastructure needed to support our diversification efforts."

Investors seemed to shrug off the problems, bidding up the company's shares in after-hours trading Tuesday and early in Wednesday's session. In recent trading, Take-Two's stock was up $1.48, 10%, to $16.33.

In the quarter ended Jan. 31, Take-Two lost $29.1 million, or 41 cents a share, on sales of $265 million. In contrast, in the year-earlier period, the company earned $55.2 million, or 79 cents a share, on sales of $502.5 million.

The company's results in the just-completed quarter included an unspecified charge for stock options expenses. Even with that, though, the results, at least on the bottom line, appear to have fallen far short of TheStreet's expectations.

Analysts polled by Thomson First Call were expecting the company to lose about 16 cents a share, or 11 cents a share excluding options costs, on sales of $237.2 million. In January, Take-Two projected sales of $230 million to $250 million for its fiscal first quarter, but declined to predict earnings for the period.

Likewise, the company's vague full-year forecast seems to imply the current quarter will fall below analysts' estimates. For the current quarter, for instance, Wall Street has forecast a break-even bottom line on sales of $254.1 million in the current quarter. In the same period a year ago, Take-Two lost $70.1 million, or 12 cents a share, on $222.1 million in sales.

The company warned in January that full-year results for the current year would be significantly below analysts' expectations. Wall Street is now expecting the company to earn 64 cents a share, excluding options costs, on $1.17 billion in sales this fiscal year.

Take-Two has been struggling at least since last summer when it acknowledged that it included a hidden, explicit sex scene in the latest version of Grand Theft Auto. In response, the company was forced to pull the game from store shelves and to re-rate existing copies of the game as to an "Adult Only" title.

In recent months, the company has repeatedly warned of poor results. And in January, the chairman of its auditing committee resigned , citing concerns about the company's management.

Shares of Take-Two closed regular trading off 28 cents, or 2%, to $14.85.